The Greek historian, Thucydides, believed that the rise of powers tended to provoke conflicts. If he were an economist observing the boom in Chinese exports to Europe, he might have predicted a trade war, and many analysts expect this today. The question is no longer whether Europe will raise some drawbridges, but rather how many and how quickly, and how will it deal with its consequences?
The risks have become clear, as bankruptcies in the European Union have risen to levels not seen since 2015, Germany will lose 143,000 jobs in the industrial sector by 2025, and most parts of Europe are witnessing a slowdown in growth and a decline in industrial production.
Far-right parties are topping opinion polls in France and Germany, and European Union leaders will discuss, during the summit, which will be held on the 18th of this month, how to confront the Chinese challenge in light of an increasingly deteriorating global economy.
The question remains: Is China really behind Europe’s economic problems? The European Union’s trade deficit in goods with China reached about one billion euros ($1.16 billion) per day in 2025, nearly double the number before the pandemic. Germany in particular has witnessed a continuous rise in imports from China and a sharp decline in exports to it, and some believe that there is manipulation.
Those who are skeptical about holding China responsible believe that high energy costs in Europe, slow bureaucratic procedures, and its inability to innovate or integrate are the real reasons. Worse still, obstructing imports of Chinese materials and parts will harm European companies in manufacturing industries, which may harm competitiveness more than it benefits it, and the list of protected “strategic” sectors is already long.
Today, France, which is hosting the G7 summit, is focusing on macroeconomic imbalances. The Chinese currency is undervalued by between 15 and 30%, which makes its exports cheaper.
Ironically, Europeans are well aware of this model. Germany perfected it in the 2010s, and its current account surplus still represents 4.5% of GDP, which is close to China’s surplus.
The European Union’s response was strong. On April 21, the city of Lisbon was allowed to proceed with the “light rail” project after replacing a Chinese contracting company, which the Union claimed had received government support, with a Polish one.
The investigation into subsidies for electric cars led to the imposition of tariffs in 2024, and tariffs on steel were approved on June 8th. Last year, the European Union banned the purchase of medical devices from China, in response to China’s exclusion of European devices, and the list goes on.
The EU’s option is to use its existing trade defense tools more aggressively, and its anti-subsidy and anti-dumping tools include careful case-by-case investigations, which can be challenged in court.
One official likens these measures to “using a teaspoon to scoop water out of the boat,” and the European Union is considering applying them to broader groups of products, or even shifting the burden of proof. If the overall data indicates excessive subsidies, companies will have to prove that they did not receive any subsidies. China’s response remains largely unknown. It may respond with an export ban that deprives the European industry of vital materials or parts. One seasoned observer says: “China is overconfident, but this makes it a difficult partner in the negotiations.”
China does not show much patience with European complaints about government support or surplus production, and considers them evidence of Europe’s weakness. On the 11th of this month, China canceled two high-level meetings with the European Union.
The trade dispute between China and America has certainly emboldened its leaders, yet they are likely to adopt strong responses, but tailored to Europe, in a desire to avoid an all-out trade war.
The European consensus appears fragile, measures beyond expanding existing instruments and “buy European” policies are unlikely, and few believe that Europe is prepared to tolerate a Chinese response, or activate its powerful anti-coercion mechanism in response.
Germany and Spain will play a decisive role, as Germany, which has only recently taken a tougher stance towards China, will fear that the response will paralyze parts of its industry.
As for Spain, it takes a realistic position, as it believes that the new world order must accommodate China’s power, and that measures must only target unfair practices whose application has been proven unfair. About “The Economist”
• China does not show much patience with European complaints about government support or surplus production, and considers them evidence of Europe’s weakness.
